IATA Highlights Worries Over GST Allegations Against Foreign Carriers

In a recent development, the International Air Transport Association (IATA) has raised concerns over the taxation issues faced by foreign airlines operating in India.

Specifically, IATA has contested the imposition of Goods and Services Tax (GST) on services provided by foreign airline headquarters to their local offices within India. The Directorate General of GST Intelligence’s summoning of foreign airlines for alleged tax evasion related to the import of services has sparked opposition from IATA.

IATA, representing 330 carriers globally, argues that the costs incurred by airline head offices should not fall under the purview of gst tax. They advocate for a “source-based” taxation approach rather than the current “exclusive residence-based” model. This proposed change aims to ensure that developing countries, including India, receive adequate revenue from air travel and shipping activities within their territories.

At an industry gathering, IATA Director General Willie Walsh expressed concerns about the complexity and potential negative consequences of such taxation changes. He warned that implementing the proposed system could lead to foreign airlines ceasing services to certain regions, ultimately resulting in reduced tax revenue for governments and increased administrative burdens.

Walsh emphasized that foreign airlines’ branch offices in India primarily serve administrative functions and do not play a significant role in crucial operational decisions, such as aircraft leasing, crew management, and maintenance. As such, attributing GST liability to these branch offices is deemed unjustified by IATA.

The association’s stance underscores the potential implications for both airlines and governments. While IATA advocates for a simplified and equitable taxation framework, it warns of the adverse effects that overly complex regulations could have on the aviation industry’s operations in India.